Electronic Money Flows describes the far-reaching present changes under way in payments and capital markets. Electronic payment forms are in the process of molding a new financial regime-largely shared and inter dependent-throughout the world. Our earlier Electronic Funds Transfers and Payments (Kluwer, 1987) looked at the new money technology in its initial phases of development and in broad focus. Then, as now, the contributors came from many different disciplines. The synthesis of their diverse views laid out the background for the electronic payments revolution to come, and the great benefits but also risks for segmented sectors of society. The old questions have not gone away; new ones have been added to the agenda. For example, what is the nature of money today amidst an array of computer-based options? What money and turnover concepts are appropriate to the electronic age? What are the effects of high-speed money flows on markets, volatility, money control, even the business cycle? Is the financial system more prone to instability but also to faster correction, given the swift movement of money and payments? At the same time, is privacy imperilled by the ubiquitous computer-linked webs that move both information and money? This second book is thus companion to Electronic Funds Transfers and Payments and expands upon it. Contributors discuss the expectations that have and have not come to fruition, together withthe new issuesofthe past four years.

This paper marks the launch of a new IMF series, Fintech Notes. Building on years of IMF staff work, it will explore pressing topics in the digital economy and be issued periodically. The series will carry work by IMF staff and will seek to provide insight into the intersection of technology and the global economy. The Rise of Digital Money analyses how technology companies are stepping up competition to large banks and credit card companies. Digital forms of money are increasingly in the wallets of consumers as well as in the minds of policymakers. Cash and bank deposits are battling with so-called e-money, electronically stored monetary value denominated in, and pegged to, a currency like the euro or the dollar. This paper identifies the benefits and risks and highlights regulatory issues that are likely to emerge with a broader adoption of stablecoins. The paper also highlights the risks associated with e-money: potential creation of new monopolies; threats to weaker currencies; concerns about consumer protection and financial stability; and the risk of fostering illegal activities, among others.

Following the companion paper on the new policy challenges related to the adoption of digital forms of money, this paper presents an operational strategy for the IMF to continue delivering on its mandate of ensuring domestic and international financial and economic stability. The paper begins by summarizing the forces driving the adoption of digital forms of money, and the new policy questions that emerge. It then focusses on how the IMF’s core activities and output will need to evolve, including surveillance, capacity development, and analytical foundations. It ends by discusses how the IMF intends to partner with other organization, and to grow and structure internal resources to fulfill this vision.

This departmental paper discusses the evolving prudential frameworks for nonbank issuers of electronic money. Some jurisdictions take a relatively light-touch approach to regulating electronic money issuers (EMIs). Others have sought to apply more stringent requirements to protect electronic money (e-money) users, as the sector has grown in importance. The paper aims to build on previous IMF staff contributions to the literature and to draw policy conclusions for strengthening e-money regulatory regimes; in particular in jurisdictions where issuers, individually or collectively, have grown to a size to which they are of macro-financial importance (see below). Chapter 2 provides background on the development of e-money, its economic benefits, and potential risks. Chapter 3 discusses prudential supervision of EMIs, followed in Chapter 4 by their oversight from a payments system perspective. Chapter 5 discusses potential additional measures for user protection and contingency arrangements for EMI failure. The last chapter presents policy recommendations for policymakers, especially in those emerging market economies and developing countries wherein EMIs have reached a scale at which they could have a significant economic impact if they were to fail.

The volume of payments handled electronically has increased dramatically in recent years, as have liquidity, volatility and the amount of money flows across borders. This important global trend works together with a growing integration in corporate business processes, and a convergence in network architecture as e-payment of all kinds moves to Internet protocol systems. The net result is a new e-payment landscape that presents daunting challenges on many levels, as well as exciting opportunities, for banks, businesses and governments. Consumer and citizen interests are also at stake. This book takes a unique, wholly integrated look at the e-payment landscape, understanding the way that existing systems are being stretched and challenged. Credit card systems are extended to facilitate Internet-based eCommerce. Consumers are becoming accustomed to using their stored-value mass transit cards to make payments for goods and services. Corporations put pressure on banks to integrate business information into their electronic payment processes. New non-financial players emerge holding important floats and many of these players are challenging for key parts of the banking franchise. This bo

Cross-border payments are expensive, slow, and opaque. These problems reflect multiple frictions, many of which boil down to limited trust among counterparties. Trust plays a central role in exchanging credit-based money. End users need to trust the issuers of money, and issuers must trust users to satisfy financial integrity requirements. Transactions are possible only where trust links exist. Interoperability between different forms of money can thus be conceptualized as the network of trusted links necessary for transactions. Traditionally, across borders, trust links involve exclusive bilateral credit relationships among correspondent banks. However, the fixed costs required to build these links foster an expensive and concentrated system. This paper interprets different payment arrangements in terms of the implied trust structures. It discusses how the tokenization of money alters trust links and allows for a potentially more efficient market structure to exchange money. The paper ends with a suggested global marketplace to trade tokenized money directly across borders.